If you are 60 years or older and want to invest your savings safely while earning attractive returns, a Fixed Deposit (FD) can be a great choice.
At present, several small finance banks are offering senior citizens up to 8.3% annual interest on 3-year FDs. These rates are available on deposits of up to ₹3 crore.
Before investing, it is always a good idea to compare interest rates offered by different banks to get the best return.
These Banks Offer the Highest FD Interest Rates
Among small finance banks, Jana Small Finance Bank is currently offering the highest interest rate of 8.30% per year for senior citizens on a 3-year FD.
Here are the latest interest rates offered by other banks:
Jana Small Finance Bank – 8.30%
Utkarsh Small Finance Bank – 8.00%
Shivalik Small Finance Bank – 8.00%
AU Small Finance Bank – 7.90%
Ujjivan Small Finance Bank – 7.75%
Equitas Small Finance Bank – 7.60%
Slice Small Finance Bank – 7.50%
Suryoday Small Finance Bank – 7.40%
ESAF Small Finance Bank – 6.50%
Choosing the right bank can make a noticeable difference in the returns you earn over the investment period.
Don’t Ignore This Important Risk
While higher interest rates are attractive, investors should also understand the risks involved.
Experts say that deposits in small finance banks are insured only up to ₹5 lakh under the Deposit Insurance and Credit Guarantee Corporation (DICGC).
Since the business model of small finance banks is different from that of large commercial banks, many financial experts recommend keeping your FD investment within the ₹5 lakh insurance limit for better safety.
When Does the Bank Deduct TDS?
If the annual interest earned from your FD in a single bank exceeds ₹1 lakh, the bank will deduct Tax Deducted at Source (TDS).
However, this is not an extra tax.
The deducted amount can be adjusted against your total tax liability while filing your Income Tax Return (ITR).
If you have paid more tax than required, you can also claim a refund.
How Senior Citizens Can Avoid TDS
According to chartered accountant Dr. Suresh Surana, senior citizens whose total tax liability is zero can avoid TDS by submitting Form 15H to their bank.
Under the new tax regime, eligible taxpayers can claim a rebate under Section 87A, making income up to the prescribed limit tax-free.
If you qualify and submit Form 15H on time, the bank will not deduct TDS.
However, if your income exceeds the eligible limit, TDS will be deducted.
Even then, you can claim a refund of the excess tax by filing your Income Tax Return.
